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FROM THIS EPISODE

This Is Celia Hirschman with On the Beat for KCRW.

The news is not good for the record business. Last week, Soundscan, the system that monitors sales, announced the lowest sales-week ever, since they began tabulating the numbers in 1991. The number-one record last week only sold 66,000 copies, sending a cold shiver down the music industry's spine. This week, the number went down to 60,000.

Also this week, EMI announced that their two most respected leaders, Alain Levy and David Munns, were out of jobs. Their boss, blamed sluggish CD sales and vowed a significant restructuring, which will eliminate 900 of the 6,000 jobs worldwide.

And smaller labels are feeling the pain as well. Billboard Magazine announced that V2, the trendsetting label, would be gutting their frontline operations in the US, continuing on only as a catalog entity. This means only CD's in their catalog will be sold and no new artists will be signed. The announcement came with 35 staff layoffs, including the president. All the artists on V2 including the The White Stripes, Moby, The Raconteurs and Josh Ritter were released from their contracts, free to negotiate with other labels. Sheridan Square Investments purchased V2 in 2006. Over the last five years, they invested over $43 million, aggressively acquiring labels like V2, only to realize that doing business in today's record market has not yielded profitable results.

So the interesting question is, while labels continue to decline, where is the future of the record business? Clearly, the industry will never return to the past glory days, because the record business will never have that much power again, nor will the leadership ever be the same. In those special years gone by, entrepreneurs, visionaries and hustlers, ran the industry. The business heads understood what was behind the velvet rope of the record business, expertly working thru an unsophisticated labyrinth of influential gatekeepers in radio and retail. Personal relationships built these kingpins.

But in the late 1990's, a massive democratization took place. Music became digital content, and suddenly anyone with a computer could make a record, distribute it to everyone they knew and try their hand in the music business. The velvet rope, once used to keep the record business elite safe, was gone.

From then, we've watched the business, sometimes slowly, sometimes quickly, eroding away, with far bigger industries consuming the content. Like much of American business, the record industry has been absorbed in a larger corporate agenda, with multinational ownership and stock prices ruling decision-making.

The value of the insiders game is now outdated, with new names like Apple, General Electric and Wal-Mart taking control.

A move forward in the business can only be effective with realism as the guide. Contracts, royalties, expectations, and economics on all sides of the business need to be adjusted to the reality of this new paradigm.

Equal attention needs to be given to the hungry consumer, who yearns to discover new talent. Commercial radio may have killed the chance for new artists to be heard, but focused Internet marketing offers a cost effective way to build bridges, right into the hearts of new fans.

It's a different morning now, and it's time for the business to wake up.

This is Celia Hirschman with On the Beat for KCRW.


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